“The demand for frac sand, and in particular Northern White, continues to be strong. We sold record quarterly volumes from our Oakdale facility in the first quarter and we anticipate strong demand for our expanded nameplate capacity, which is currently ramping up and is expected to be fully operational in the second quarter,” stated Charles Young, Chief Executive Officer. “We continue to take steps towards becoming a fully integrated ‘mine to the wellhead’ supplier of frac sand. During the first quarter we partnered with Canadian Pacific to offer our customers competitive, efficient rail services, acquired rights to operate a unit train capable transloading terminal in the Bakken, and signed a new long-term take-or-pay contract with a large exploration and production company for delivery of frac sand at our terminal in the Bakken. Additionally, we entered into a definitive agreement to acquire Quickthree Solutions, Inc., a manufacturer of portable vertical frac sand storage solutions at the wellsite. This deal is expected to close by the end of May.”

First Quarter 2018 Highlights

Revenues were $42.6 million in the first quarter of 2018, a slight decrease compared to fourth quarter 2017 revenues of $43.0 million. The decrease in revenues was primarily due to higher production costs and lower freight revenue, offset by higher sales volumes and a higher average price per ton sold. First quarter 2018 revenues increased by 70% compared to first quarter 2017 revenues of $25.1 million. The increase in revenues year over year was primarily due to higher sales volumes and higher freight revenue, resulting from increased shipments to customers to whom we bill freight charges.

Overall tons sold were approximately 723,000 in the first quarter of 2018, the highest in Company history, compared to approximately 706,400 tons sold in the fourth quarter of 2017 and 559,000 tons in the first quarter of 2017, increases of 2% and 29%, respectively.

Net income was $1.0 million, or $0.02 per basic and diluted share, for the first quarter of 2018, compared with net income of $10.9 million, or $0.27 per basic and diluted share, for the fourth quarter of 2017 and net income of $1.0 million, or $0.02 per basic and diluted share, for the first quarter of 2017. The decrease in net income compared to the fourth quarter of 2017 was primarily due to a one-time tax benefit of $8.5 million, or $0.21 per basic and diluted share, that was booked in the fourth quarter 2017 due to the changes in the U.S. tax laws that were enacted in December 2017.

Adjusted EBITDA was $5.9 million for the first quarter of 2018 compared to $3.7 million during the same period last year, an increase of 58% on a year-over-year basis and a decrease of 34% compared to fourth quarter 2017 Adjusted EBITDA of $8.9 million. The increase in Adjusted EBITDA compared to the first quarter of 2017 was primarily due to higher sales volumes and higher freight revenue, partially offset by higher production costs. The decrease in Adjusted EBITDA compared to the fourth quarter of 2017 was primarily due to higher operating expenses incurred in anticipation of the expansion of our Oakdale facility, which we expect to be completed and operational during the second quarter of 2018, and less costs being capitalized to inventory while our wet plant operations are reduced during winter months.

Capital Expenditures

Smart Sand’s capital expenditures totaled $46.9 million for the quarter ended March 31, 2018, and were largely associated with the expansion at our Oakdale sand processing facility, investment in various enhancement and cost improvement projects and our terminal investment in the Bakken. The Company estimates that full year 2018 capital expenditures will be approximately $85 to $95 million, excluding any additional acquisitions, of which $45.7 million relates to capital expenditure carryover from 2017 to complete the expansion of our Oakdale facility to 5.5 million tons of dry nameplate sand processing capacity. This expansion is being commissioned and is expected to be fully operational in the second quarter of 2018. At March 31, 2018, the Company had approximately $2.6 million of cash on hand. On April 6, 2018, the Company amended its credit facility to increase the amount available by $15 million to $60 million, of which $45 million is currently available to support liquidity needs in 2018.

Conference Call

Smart Sand will host a conference call and live webcast for analysts and investors this morning, May 10th, at 10:00 a.m. Eastern Time to discuss the Company’s first quarter 2018 financial results. Investors are invited to listen to a live audio webcast of the conference call, which will be accessible on the “Investors” section of the Company’s website at www.smartsand.com. To access the live webcast, please log in 15 minutes prior to the start of the call to download and install any necessary audio software. An archived replay of the call will also be available on the website following the call. The call can also be accessed live by dialing (888) 799-5165 or, for international callers, (478) 219-0056. The passcode for the call is 4729208. A replay will be available shortly after the call and can be accessed by dialing (855) 859-2056 or, for international callers, (404) 537-3406. The conference ID for the replay is 4729208.

Forward-looking Statements

All statements in this news release other than statements of historical facts are forward-looking statements that contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as "expect," “will,” “estimate,” “believe” and other similar expressions. Although we believe that the expectations reflected and the assumptions or bases underlying our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause the Company's actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements.

Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include, but are not limited to, fluctuations in product demand, regulatory changes, adverse weather conditions, increased fuel prices, higher transportation costs, access to capital, increased competition, changes in economic or political conditions, and such other factors discussed or referenced in the “Risk Factors” section of the Company’s Form 10-K for the year ended December 31, 2017, filed by the Company with the U.S. Securities and Exchange Commission on March 15, 2018.

You should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

About Smart Sand

Smart Sand is a pure-play, low-cost producer of high-quality Northern White raw frac sand. We sell our products primarily to oil and natural gas exploration and production companies and oilfield service companies. We own and operate a raw frac sand mine and processing facility near Oakdale, Wisconsin, at which we have approximately 321 million tons of proven recoverable reserves as of December 31, 2017. We currently have 3.3 million tons of annual nameplate processing capacity, which we are in the process of expanding to approximately 5.5 million tons. We expect this expansion to be completed in the second quarter of 2018. For more information, please visit www.smartsand.com.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

March 31, 2018(unaudited)

December 31, 2017(unaudited)

March 31, 2017(unaudited)

(in thousands, except per share amounts)

Revenues

$

42,628

$

43,037

$

25,059

Cost of goods sold

35,413

32,938

19,662

Gross profit

7,215

10,099

5,397

Operating expenses:

Salaries, benefits and payroll taxes

2,573

2,517

1,697

Depreciation and amortization

188

148

108

Selling, general and administrative

3,101

2,868

2,034

Total operating expenses

5,862

5,533

3,839

Operating income

1,353

4,566

1,558

Other income (expenses):

Other interest expense, net

(180

)

(110

)

(111

)

Other income

34

265

37

Total other income (expenses), net

(146

)

155

(74

)

Income before income tax (benefit) expense

1,207

4,721

1,484

Income tax (benefit) expense

232

(6,165

)

515

Net income

$

975

$

10,886

$

969

Net income per common share:

Basic

$

0.02

$

0.27

$

0.02

Diluted

$

0.02

$

0.27

$

0.02

Weighted-average number of common shares:

Basic

40,412

40,393

39,697

Diluted

40,441

40,435

39,874

CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2018(unaudited)

December 31, 2017(audited)

(in thousands)

Assets

Current assets:

Cash

$

2,135

$

34,740

Restricted cash

487

487

Accounts receivables, net

27,691

23,377

Unbilled receivables

206

1,192

Inventories

5,272

9,092

Prepaid expenses and other current assets

4,992

3,849

Total current assets

40,783

72,737

Property, plant and equipment, net

210,037

172,202

Deferred financing costs, net

400

892

Other assets

3,414

971

Total assets

$

254,634

$

246,802

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

12,243

$

26,123

Accrued and other expenses

11,819

7,576

Deferred revenue

872

—

Current portion of equipment financing obligations

502

572

Current portion of notes payable

288

288

Total current liabilities

25,724

34,559

Revolving credit facility, net

15,624

—

Deferred tax liabilities, long-term, net

13,546

13,239

Asset retirement obligation

8,117

8,982

Total liabilities

63,011

56,780

Stockholders’ equity

Common stock

40

40

Treasury stock, at cost

(720

)

(666

)

Additional paid-in capital

159,739

159,059

Retained earnings

32,564

31,589

Total stockholders’ equity

191,623

190,022

Total liabilities and stockholders’ equity

$

254,634

$

246,802

Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

We define EBITDA as our net income, plus (i) depreciation, depletion and amortization expense, (ii) income tax expense (benefit), (iii) interest expense and (iv) franchise taxes. We define Adjusted EBITDA as EBITDA, plus (i) gain or loss on sale of fixed assets or discontinued operations, (ii) integration and transition costs associated with specified transactions, including our initial public offering, (iii) equity compensation; (iv) development costs; (v) non-recurring cash charges related to restructuring, retention and other similar actions, (vi) earn-out and contingent consideration obligations and (vii) non-cash charges and unusual or non-recurring charges. Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess:

the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;

the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;

our ability to incur and service debt and fund capital expenditures;

our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods and capital structure; and

We believe that our presentation of EBITDA and Adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered alternatives to net income presented in accordance with GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definition of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net income for each of the periods indicated:

Three Months Ended

March 31, 2018

December 31, 2017

March 31, 2017

(in thousands)

Net (loss) income

$

975

$

10,886

$

969

Depreciation, depletion and amortization

3,160

2,184

1,667

Income tax expense (benefit)

232

(6,165

)

515

Interest expense

219

174

173

Franchise taxes

220

31

228

EBITDA

$

4,806

$

7,110

$

3,552

(Gain) loss on sale of fixed assets (1)

-

66

(39

)

Integration and transition costs

-

-

-

Equity compensation (2)

490

495

176

Development costs (3)

328

766

-

Cash charges related to restructuring and retention (4)

94

40

-

Non-cash charges (5)

134

453

20

Adjusted EBITDA

$

5,852

$

8,930

$

3,709

(1) Includes gains and losses related to the sale and disposal of certain assets in property, plant and equipment.

(3) Represents costs related to current development project activities.

(4) Represents costs associated with the retention and relocation of employees.

(5) Represents accretion of asset retirement obligations.

Production Costs

We also use production costs, which we define as costs of goods sold, excluding depreciation, depletion, accretion of asset retirement obligations and freight charges to measure our financial performance. Freight charges consist of shipping costs and railcar rental and storage expenses. Shipping costs consist of railway transportation costs to deliver products to customers. A portion of these freight charges are passed through to our customers and are, therefore, included in revenue. Railcar rental and storage expenses are associated with our long-term railcar operating agreements with certain customers. We believe production costs is a meaningful measure to management and external users of our financial statements, such as investors and commercial banks, because it provides a measure of operating performance that is unaffected by historical cost basis and logistics charges that vary by customer. Cost of goods sold is the GAAP measure most directly comparable to production costs. Production costs should not be considered an alternative to cost of goods sold presented in accordance with GAAP. Because production costs may be defined differently by other companies in our industry, our definition of production costs may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

The following table presents a reconciliation of production costs to cost of goods sold:

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